Investors often rely on analysts’ recommendations when making decisions about stocks. But are Wall Street’s bullish views on Cadence Design Systems (CDNS) really worth considering?
Let’s delve into the reliability of brokerage recommendations and see how you can use them to your advantage.
Currently, Cadence has an average brokerage recommendation (ABR) of 1.25, suggesting a favorable outlook for the stock. However, relying solely on this information for investment decisions may not be wise.
Analysts from brokerage firms often display a strong positive bias towards stocks they cover due to their vested interests. Hence, their recommendations may not reflect the true potential of a stock’s future price movement.
One potential method to make an informed investment decision is to validate the ABR with the Zacks Rank, a tool that has shown a consistent track record of predicting stock price movements. The Zacks Rank categorizes stocks based on earnings estimate revisions and provides a more balanced perspective compared to brokerage recommendations.
It’s important to note that although both ABR and Zacks Rank use a 1-5 scale, they measure different aspects of a stock’s potential. While ABR relies solely on brokerage recommendations, Zacks Rank is driven by earnings estimate revisions and is more timely in predicting future stock prices.
Considering the earnings estimate revisions for Cadence, the Zacks Consensus Estimate for the current year has remained steady, resulting in a Zacks Rank #3 (Hold) for the stock. This indicates caution despite the Buy-equivalent ABR for Cadence.
If you’re seeking alternative investment options, Zacks experts have singled out a stock with significant potential for growth. It has been credited with a “watershed medical breakthrough” and is poised for substantial upside as it emerges from bear market lows.
Furthermore, if you want the latest recommendations from Zacks Investment Research, you can download their report to explore top stocks for the next 30 days.
If you’d like to read more about this on Zacks.com, you can click here.
Always remember that the views and opinions expressed are those of the author and do not necessarily reflect those of Nasdaq, Inc.